Maytag mum on local production

Maytag mum on local production
 
Date March 08, 2005
Section(s) Local News
By DAVID PITT

Associated Press Writer

PETER HUSSMANN

Newton Daily News Editor

Maytag Corp.’s chief executive said Monday the company will pursue more efficient manufacturing plants and continue to outsource more of its production to foreign companies, in addition to streamlining its washer and dryer production facilities.

CEO Ralph Hake, in a presentation at the 26th annual Raymond James Institutional Investors Conference in Orlando, Fla., also said factories making washers and dryers will see changes in the coming year.

Hake said the company will dedicate one factory to making top-load washing machines and have one dedicated dryer plant.

“Additional volumes will begin to migrate from our other plants to these two dedicated facilities,” he said.

Hake did not state where the facilities would be located or whether the location decisions had already been made or were still under evaluation.

Maytag spokewoman Karen Lynn declined to elaborate on whether that meant factories would be closing this year or what impact that might have locally, where the Newton factory has been cited as the corporation’s most expensive operation.

“We didn’t go down into specific details of that,” she said.

The move will improve quality and cost and simplify parts and components distribution, Hake said. In addition, the move will allow Maytag greater flexibility in the plants to meet marketplace needs.

Maytag operates laundry manufacturing plants in Newton; Herrin, Ill.; Searcy, Ark.; and Florence, S.C. All four facilities make washers although the Florence facility does not make dryers.

In Newton, Maytag produces two lines of vertical axis washing machines, the Atlantis and Dependable Care. Companion dryers for the models are also made.

Hake also talked about Maytag‘s high efficiency line of washers.

Maytag has the broadest and most complete suite of high-efficiency laundry products in the market place,” he said.

Hake said Maytag will be reviewing its high-efficiency production this year, as well.

“From a plant utilization standpoint, we still have work to doand will be evaluating those this year,” he said.

Maytag began production of its horizontal-axis Neptune washing machine in Newton eight years ago, where the front-load model is still produced. Since that time Maytag has introduced a Neptune top-load, which is made at a U.S. Maytag plant, and two products produced overseas by Samsung, a compact 24-inch undercounter model and a new 27-inch model introduced this month.

Hake said more outsourcing will occur this year. About 12 percent of Maytag‘s products are currently made overseas.

“We have sourced very little historically as a company and we will continue to source more,” Hake said. “The percentage will go up.”

Maytag, which completed the closure of a Galesburg, Ill., refrigerator plant in 2004 and opened a new refrigerator factory in Reynosa, Mexico, will continue to pursue less costly manufacturing options, Hake said.

He said the company will likely find other areas where “cost structure will not support us manufacturing here in the U.S.”

“Longer term, I want to emphasize that we will continue to review our overall strategy and take measures to identify greater manufacturing and sourcing opportunities in low-cost regions,” Hake said.

Cost cutting measures last year resulted in $30 million in savings and the company is on track to save $150 million in 2005, Hake said.

About $120 million comes from a company restructuring, which cut 1,100 salaried jobs from the work force of about 19,500.

The company saved another $23 million by closing the Galesburg refrigerator plant, said George Moore, Maytag‘s executive vice president and chief financial officer.

Hake said the company is leaner and more capable of getting new appliances to market faster.

Maytag will likely look at finding ways to reduce the escalating cost of health care for retirees, which Hake said has doubled since 1999.

Moore said pension and retiree medical expenses will increase to $140 million this year, $26 million higher than 2004.

“We are evaluating our options regarding retiree medical costs,” Moore said.

Increasing costs of steel and fuel could threaten profitability this year, but Moore said cost-saving initiatives and appliance price increases will help offset raw material prices.

The company expects earnings of $1.10 to $1.30 per share for the year, Hake said.

Maytag shares closed up $1.23 at $15.93 on Monday. In early trading today, the stock had dropped 42 cents to $15.51.

The stock has been trading at a 52-week range of $14.57 to $32.31.

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